Posts Tagged markets

Self-responsibility, the GFC and where the occupiers got it wrong

George Packer has written an incredibly moving profile in this week’s New Yorker on Ray Kachel — a nerdy loner who worked as a freelance tech-support contractor until his business dried-up post GFC (although this does not seem to have been a direct result of the GFC), then decided to move across the country to join Occupy Wall Street when his savings ran out. By the way, he is still living homeless in New York and can be followed on Twitter.

There is no doubt that Kachel’s story is a sad one, as are the many other stories of people struggling in a depressing economic climate, and I would encourage everyone to read the article – it puts a great human face on the OWS movement and does seem to just “tell the story”, rather than taking an ideological bent.

In the middle of the piece, something did strike me about the slogans that the “occupiers” were using. 

Ray Kachel’s Journey from Seattle to Zuccotti Park : The New Yorker.

At the east end of the park, along the wide sidewalk next to Broadway, beneath a sculpture of soaring red steel beams called “Joie de Vivre,” the occupation and the public merged. Demonstrators stood in a row, displaying signs as if hawking wares, while workers on their lunch hour and tourists and passersby stopped to look, take pictures, talk, argue. An elderly woman sat in a chair and read aloud from Hart Crane’s “The Bridge.” Another woman stood silently while holding up a copy of Ron Suskind’s “Confidence Men”—day after day. An old man in a sports coat and golf cap: “For: Regulated Capitalism. Against: Obscene Inequality. Needed: Massive Jobs Program.” A union electrician in a hard hat: “Occupy Wall Street. Do It for Your Kids.” A woman in a blue nurse’s smock: “This R.N. Is Sickened by Wall Street Greed. Trust Has Been Broken.” A young woman in jeans: “Where Did My Future Go? Greed Took It.” The crowd was dense, the talk overlapping.

The issue is this “greed” that they are talking about. The whole movement is there to end “corporate greed” and blames the GFC/the current economic crisis on the apparent “greed” of the bankers and politicians.

Why is that a problem? I’ll refer you to this little anecdote with which Michael Lewis began a recent essay in the New York Review of Books:

 How We Were All Misled by John Lanchester | The New York Review of Books.

Most people with a special interest in the events of the credit crunch and the Great Recession that followed it have a private benchmark for the excesses that led up to the crash. These benchmarks are a rule of thumb, a rough measure of how far out of control things got; they are phenomena that at the time seemed normal but that in retrospect were a brightly flashing warning light. I came across mine in Iceland, talking to a waitress in a café in the summer of 2009, about eight months after the króna collapsed and the whole country effectively went bankrupt under the debts incurred by its overextended banks. I asked her what had changed about her life since the crash.

“Well,” she said, “if I’m going to spend some time with friends at the weekend we go camping in the countryside.”

“How is that different from what you did before?” I asked.

“We used to take a plane to Milan and go shopping on the via Linate.”

An Icelandic waitress spending her free time going on shopping trips to Milan. What’s wrong with that picture? It is little wonder that the banks in Iceland collapsed – this is the culture that Iceland had pre-2008. As Lewis also points out, the reason that Germany is doing so well at the moment is that simply that they did not live like this. In German culture, accumulating huge amounts of debt is simply not acceptable, so they didn’t.

HERE’S my problem with the whole “occupy” paradigm: who’s fault was it that the Icelandic waitress thought it was acceptable to accumulate huge amounts of debt in order to have the kind of lifestyle that people who earn 2-3 times as much can’t really afford? Was it the bank teller who gave her the credit? The banker who gave that teller the discretion to do that? The politicians who didn’t make laws about how much credit a waitress is entitled to?

Maybe all of them a little, but there is much more to it than that. Essentially, it was half of the free world. 

This is what everyone isn’t telling you. The GFC was not caused by bankers, political donations or market deregulation. It was caused by waiting staff, engineers, schoolteachers, freelance tech guys, middle-managers and sales reps. It was  everyone who decided to get a mortgage for a house worth 10x their annual salary and the sales rep who sold them the mortgage even though they knew it would probably not be paid back. It was the guy who wanted a bigger TV, the girl who wanted a fancier car and the couple who wanted to take their kids to Disneyland.

THE financial crisis wasn’t caused by corporate greed or Wall Street greed, it was caused by societal greed and a culture of entitlement. The West lost its work ethic. People had the idea that they could drop out of high school, then get a low-skill job working a 35-hour week with generous leave and a pension but still live like someone with two degrees working double the hours.

People need to stop pointing fingers at the tops of skyscrapers and start pointing at themselves. It’s easy to just shift the blame onto abstract entities who still have all of the stuff that others had repossessed,  but it was those peoples’ fault for buying things they couldn’t afford in the first place. I’m not saying that the senior executives didn’t make mistakes, but they are being unfairly scapegoated by people who need someone to blame and sure as hell “know” that it wasn’t their own fault.

The people of Iceland faced up to the reality of what they had done and allowed themselves to be punished for it. Their banks failed, their life savings were wiped out and their retirement moved much further away, but their economy is recovering and they are slowly going back to work. The people of Greece, on the other hand, refused to give up the idea that they could work 9-5 plus breaks plus annual leave, retire at 55 and then live comfortably off other people’s money for the next 30 years. THAT is greed.

Greed is not limited to the ones at the top, they just worked hard enough to get what you want. Ending corporate greed doesn’t just mean cutting the CEO’s bonus, it means that the worker on the floor needs to start taking more camping trips and stop taking any shopping trips to Milan.

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